Lecture+20+April+11

Lecture+20+April+11 - Todays Agenda Public goods Common...

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Today’s Agenda Public goods Common property resources Final exam May 5, 8 to 11 a.m. College Avenue Main Gym NOT in Hickman 138!
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Group tutorial sessions? Could be held: 8 to 10 p.m. two nights a week to help you prepare for the final I will hire tutor if worthwhile to you. Share cost according to value to you.
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The value I place on these 20 hours of tutorial help is: A. Zero to $0.99 B. $1.00 to $3.99 C. $4.00 to $6.99 D. $7.00 to $9.99 E. $10.00 or more
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My office hours Monday 5:15 to 6:15 p.m. Wednesday 8:00 to 10:00 a.m. May be expanded if useful to you
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Public goods Two defining properties Non-rival consumption My consumption of the good does not prevent your consumption of the same unit of the good. Costly exclusion It is impossible or expensive to keep non-payers from enjoying the benefits of the good.
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A sandwich comprising chicken fingers, mozzarella sticks, French fries, lettuce, tomato and marinara sauce on a sub roll is A. excludable and rival in consumption. B. excludable and nonrival in consumption. C. nonexcludable and rival in consumption. D. nonexcludable and nonrival in consumption. E. a nutritious and satisfying accompaniment to the study of economics.
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 a
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 a b
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 a b a+b
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 a b a+b
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 MB social = MB 1 + MB 2 Social marginal benefit is the vertical sum of individuals’ marginal benefits.
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Efficient provision of a public good Q $/Q Q $/Q Q $/Q D 1 = MB 1 D 2 = MB 2 MB social MC social Q* Social marginal benefit is the vertical sum of individuals’ marginal benefits. Allocatively efficient public good provision requires Σ i MB i = MC social
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Hidden radio-transmitter device used to retrieve stolen cars No external sign that Lojack is installed Thus no direct effect on likelihood that a protected car will be stolen Availability of Lojack associated with a sharp fall in auto theft
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1- 1 20 Contribute Don’t Contribute Contribute 1 2 Don’t Contribute -1 0 Baker Abel Competitive markets underprovide public goods Cost of provision $3 per unit Benefit to each consumer $2 per unit
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Review: Two notions of strategic equilibrium (s 1 , s 2 )
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This document was uploaded on 10/27/2011 for the course ECONOMICS 103 at Rutgers.

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Lecture+20+April+11 - Todays Agenda Public goods Common...

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